First Home Loans
A Comprehensive Guide
Buying your first home is an exciting time – but it can also be complicated – our job is to make it easy for you.
This comprehensive guide will take you through the ins and outs of getting your first home loan and prepare you for the next steps.
View each step to learn more:
GET A DEPOSIT
GET PRE-APPROVAL
FIND YOUR DREAM HOME
GET LOAN APPROVED
GET A DEPOSIT
CHECK FIRST HOME GRANT ELIGIBILITIES
Getting a deposit together.
Most lenders want to see a 20% deposit of the total house price before they’ll consider giving you a loan. For example, if you’re buying a house worth $500,000, you’ll need to find at least $100,000 up front. Otherwise you could get hit with Lenders Mortgage Insurance (LMI).
What is LMI?
Lenders Mortgage Insurance is insurance you pay to protect the lender. The lender can make you pay this if your deposit is less than 20%. If you default on the loan, the insurance only helps the lender.
Thankfully, there are other options available to you if you don’t have a 20% deposit or can’t afford to wait that long.
1. Check your potential employment benefits.
Banks view certain professions favourably, and this can mean you won’t need to save up a full 20% deposit upfront, or you may be eligible to avoid paying LMI. Here’s a non-exhaustive list of the main employment types:
- Doctors
- Nurses
- Accountants
- Lawyers
- Pharmacists
- Frontline workers
- Buying or building a new home (including a house, flat, unit, apartment, townhouse) or substantially renovated home in your relevant state of residence
- The home will be your principal place of residence
- The market value of the property is $650,000 or less
- Each applicant is at least 18 years old
- At least one applicant is an Australia citizen, permanent resident or New Zealand citizen permanently residing in Australia on a Special Category Visa
Eligible first-home buyers can purchase or build a home with a deposit between 5% and no more than 20% of the total purchase value, and the Government guarantees the remainder up to a 20% deposit. This save the buyer from paying LMI.
- Must be over 18 years old
- Must be an Australian citizen
- Have earned $125,000 or less in the last financial year as a single, or $200,000 or less combined income
- Have saved at least a 5% deposit
- Live in the property
- Purchase a property under your state or territory’s price cap
First Home Super Save Scheme (FHSSS)
The First Home Super Saver Scheme (FHSSS) allows you to save money for a home deposit through voluntary contributions made to your super fund. These before-tax concessional or after-tax non-concessional contributions can be accessed at a later date to go toward your first home deposit.
Utilising the FHSSS can provide you with disciplined automated savings and help build up your deposit faster.
As with any Government scheme, it’s important to check your eligibility carefully.
Stamp Duty Concessions
Most Australian states and territories offer stamp duty relief for eligible first home buyers.
The exact discount depends on your location and the value of your new home purchase.
Use our Stamp Duty Calculator to see if you’re eligible!
GET PRE-APPROVAL
LEARN KEY HOME LOAN TERMINOLOGY
Get the green light (pre-approval).
Pre-approval is when a lender has looked at your finances and is satisfied you can pay off the type of loan you applied for. It basically means:
- You know what you can spend
- You can bid at auction
- You know what your loan repayments will be
Getting your deposit together is a great first step, but a pre-approval is the next item to tick off the list. It usually takes around 3 days to hear back from the lender and get the green light on a pre-approval. They remain valid for up to 3 months as well – giving you plenty of time to find a home.
As a mortgage broker, I can get you pre-approved in no time from one of 60+ lenders to ensure you’re out there shopping for your first home with confidence.
Home loan cheat sheet.
There’s so much home loan terminology and jargon it can be hard to get your head around it all. The below are some key terms that will not only help you now, but throughout your home ownership journey in future.
Variable rate loan:
The interest rate varies over the life of the loan. If interest rates rise, you pay more, and vice versa.
Fixed rate loan:
This is the opposite of a variable rate loan. Your interest rate and repayments stay the same, no matter what. No surprises.
Split loan:
You’re able to fix part of your loan, and leave the rest variable. It’s like the best of both worlds.
Packaged loan:
Professional packages offer discounts on standard variable and fixed rates, the waiving of fees, and in some cases, great deals on other products from the same lender.
Introductory rate loan:
Also, known as ‘honeymoon’ loans, these offer a low interest rate for a short period (eg. a year), and then the rate moves to the standard variable rate.
Construction loan:
If you want to build a home, this could be the loan for you. You get the money you’re being loaned in instalments (drawdowns), as you need it for construction. Interest is only charged on the amount you’ve drawn down, so you pay less at the start. Even better, these loans are often interest-only for the first year while the build is underway.
There are some tricks you can use along the way to try to pay off your loan quicker, or take the financial pressure off.
Offset account:
This allows you to keep money in an account attached to your home loan. The money in it offsets what you owe on the loan. You need to make sure the account includes a redraw facility so you can still access the money if you need to.
Redraw facility:
This allows you to make extra payments whenever you want, but also take the extra out if you find yourself in a pickle and need cash urgently.
Additional repayments:
Making additional repayments throughout your loan term could potentially save you thousands of dollars in interest.
Interest-only repayments:
You can reduce your monthly loan repayments by only paying the interest. This can seem like a good idea in the short term but it means you’re not making progress toward paying off your home loan principal, aka everything you owe.
FIND YOUR DREAM HOME
House Hunting
So you’ve saved up a deposit. You’ve got pre-approval and you know a thing or two about home loans. It’s time to start house hunting with confidence!
Can I bid at auction?
Yes. If your finances have been assessed by a lender and your mortgage broker has given you the all clear, then you should be able to bid at auction.
Let’s be 100% clear though – ALWAYS triple check with your mortgage broker before bidding at an auction, just in case.
The main things to take into account with purchasing at auction is if you’re the winning bidder you sign a binding contract on the day. This means you need to ensure you get any building or pest reports done beforehand, and ask all the important questions about the property before auction day.
How long do I need for settlement?
Best practice is to secure a 45-day settlement with a 21-day finance clause (if buying via For Sale method). Not every real estate agent will accept this though, so be prepared to check with your mortgage broker around different settlement periods, such as 30 or 60 days, and finance clause windows as well. Each lender is different with their turnaround times and your broker can advise you.
Do I need a building & pest inspection
It’s always recommended, where possible, to get a building and pest inspection.
You can request one or both as part of the contract of sale. In some states, the Vendor/Seller will provide a report for your consideration. In South Australia, it’s up to the purchaser to arrange their own building and pest inspection during the cooling-off period or before auction day. If you are buying at auction, always remember it will be an unconditional contract so you won’t be able to get a building inspection after you’ve signed a contract – you must get it before!
GET LOAN APPROVED
We got the house! Now what?
So you’ve signed a contract and got the house of your dreams – congrats! What happens next?
Firstly, let your mortgage broker know ASAP so they can get the application underway with the chosen lender. This ensures deadlines are met for finance clauses so you can have a smooth sail through to settlement.
During this time you’ll also want to select a local conveyancer to assist you with the legal process around transferring the house into your name at settlement, as well to help answer any curly questions in relation to the Contract of Sale. A conveyancer, just like a mortgager, is in your corner fighting for your best interests.
Your loan has been approved.
Congratulations! The lender has now formally approved your loan application and will provide you with the necessary funds to settle on your new home. How good is that!? From here, your mortgage broker and conveyancer will work with you behind the scenes to ensure all boxes are ticked as you head towards settlement day.
Start choosing your new furniture and planning your house warming party!
The final step … you’ve guessed it … is Settlement Day. You’ll be able to collect the keys to your new home – WOOHOO!
Getting into the property market is one of the biggest financial decisions you’ll make. From confusing contracts and jargon filled paperwork to inspections and ultimately, sealing the deal – I’m here to give it to you straight.
Like the homes on your wishlist, no two loans are the same. Step by step, I’ll help you make sense of the non-sense, and work with over 60 banks and lenders to find the loan most suited to your first home.
First Home Owners Grant (FHOG)
The First Home Owners Grant (FHOG) is a government initiative designed to assist first home buyers get into the property market. Eligible applicants can receive up to $15,000 towards buying or building a new property, valued up to $650,000. The grant covers all property types including houses, townhouses, units and apartments, owner-builder and even off-the-plan! For the most accurate and up-to-date information it is recommended to visit your relevant state government website to check your eligibility.
The process is easy!
1
Start Your Application
Once you’ve started an application with us, I’ll be in touch to assist you through the process.
You’ll enjoy the ease and flexibility of our secure online portal to assist in providing the required documents.
2
Receive Personalised Advice
Once I’ve assessed your situation, I’ll provide you with a few options to consider personalised to your situation and goals.
3
Select Your Preferred Loan
I’ll guide you through the options and assist you in selecting the right loan product. Then I’ll do the legwork for you with the lender and process the application through to approval.
4
Receive Your Funds
I’ll keep in touch with you in the lead up to your loan settlement day and ensure you receive your funds to facilitate your exciting next move!
Loan types and features
There are a number of loan types available to you; variable rates, fixed rates, guarantor loans and more. Scroll through some of the options below to get a better understanding of what the differences are. I’m here to answer your questions when you’re ready.
Variable Rate Loan
The interest rate can change over the life of the loan. This gives you flexibility but can also leave you open to rate rises. Variable loans offer more flexible features like unlimited additional repayments, redraw, and offset accounts.
Fixed Rate Loan
This is the opposite of a variable rate loan. Your interest rate and repayments will stay the same during the fixed term, no matter what.
Interest Only Loan
As the name suggests, you only pay the interest on the principal balance for a set term, with the principal balance unchanged.
Packaged Loan
Professional packages offer discounts on standard variable and fixed rates, the waiving of fees and, in some cases, great deals on other products from the same lender. A packaged loan usually comes with one annual fee for the bundled products.
Split Loan
You’re able to fix part of your loan, while leaving the rest variable.
Introductory Rate Loan
Also known as ‘honeymoon’ loans, these offer a low interest rate for a short period (eg. a year), after which the rate moves to the standard variable rate.
Guarantor Loan
A guarantor uses the equity they’ve built up in an existing property to help you purchase your property sooner. Guarantors could be your parents, parent-in-law, stepparent or grandparents.
FAQs for first home buyers
We’ve got your questions covered.
Typically lenders ask for 20% of the total house price before they’ll consider giving you a loan but there are a number of ways around this. Some lenders will accept a smaller deposit but it’s likely that you’ll need to pay Lenders Mortgage Insurance (LMI). There might also be grants that you can take advantage of. Get in touch to chat about your options.
Of course! Borrowing capacity refers to how much you can borrow from a lender. To get an estimate of your borrowing capacity, use our calculator. If you want to get an in depth review of your borrowing capacity, get in touch today.
With over 60 lenders, you and I are spoiled for choice. I narrow my search down through talking to you about your wants and needs. I will show you your options, listing the pros and cons of each loan and ultimately we will come to a decision together.
There is no cost to you. A mortgage broker acts as the middleman between you and the lenders/banks. We work for you, but get paid by the lender or bank of your choosing.